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Thank You Counts

Posted on April 1, 2005
by Chief Marketer Staff

Solid research helps make the case last year for performance recognition incentive programs. The Forum for People Performance Management and Measurement at Northwestern University, for example, showed a link between employee satisfaction and improvement in the bottom line.

The study, The Impact of Employee Attitudes on Market Response and Financial Performance, released in November 2004, found that happy employees equal satisfied customers, even if the employees have no direct contact with customers. This suggests that influencing customer behavior goes beyond advertising, beyond delivering on a brand’s promise, beyond customer service and beyond product research and development to maximizing employee engagement and satisfaction.

The Forum’s research addresses a basic business principal: It’s cheaper to retain customers than get new ones. It also supports the idea that internal marketing and communications, directly addressing all levels of employees and their job requirements, need to be implemented as rigorously as external marketing and sales programs, Francis J. Mulhern, Ph.D., associate dean and chair of Northwestern University’s graduate program in Integrated Marketing Communications, said when the study was released.

“Now you have very credible outside sources saying this is no more a nice thing to do, this is a must have,” says Michelle Smith, VP-business development at O.C. Tanner, a Salt Lake City-based provider of employee recognition services. “Companies are looking for every possible advantage they to can get in the marketplace, and now we’ve really got the teeth in research to show that companies that engage in promotional marketing incentive and recognition programs are significantly outperforming their competitors who don’t have these programs.”

The Incentive Marketing Association (IMA), which partners with the Forum, says the research proves incentives do work. The Forum is developing a curriculum on people performance management and measurement that includes a component on incentives.

The growing body of research from the Forum, as well as studies from IMA, the SITE Foundation and The Incentive Federation, “offers compelling evidence that incentive programs measurably improve employee productivity,” says Karen Renk, executive director of the IMA.

The IMA projects that spending on products and services used for incentive programs will reach $28 billion in 2005, up from $26 billion in 2000.

Another study released last year by the Washington, DC-based International Society for Performance Improvement, found that the right incentive programs can boost performance among teams of employees by as much as 44%, and among individual workers by as much as 25%.

“When you start talking about bottom-line savings and contribution to the profit line and shareholder value, and we’ve not talked like that in the industry before, now we can get their attention,” O.C. Tanner’s Smith says.

Momentum is also building for companies to consolidate their programs corporate-wide, with plenty of variations, to eliminate costs and streamline the administrative burdens. Lack of consistency — one employee gets a ticket to the movies, while another gets a trip to the Caribbean — and a lack of visibility into the program — management doesn’t know who got the reward or what they were rewarded for — are the two biggest complaints Smith hears.

“If you want employees to understand the right corporate messages and to treat your customers the right way, you have to set the example by making sure they have that message and they’re treated with the same care and respect you want them to demonstrate to customers,” Smith says.

Last October, Reuters launched its first recognition program, rolling it out to 14,700 employees in more than 90 countries. The Living Fast Recognition Program recognizes employees and teams that exceed expectations. Winners receive a Reuters-branded award by e-mail or by mail in Reuters points that can be redeemed to buy merchandise from a selection of local merchants posted on a Web site.

2003 Promotional Product Sales

Wearables

29.5%

Writing Instruments

10.5%

Office Accessories

7.7%

Calendars

6.9%

Glassware

5.5%

Bags

5.4%

Recognition

5.0%

Sporting Goods

4.2%

Buttons

3.5%

Automotive

2.9%

Computer

2.8%

Housewares

2.7%

Textiles

2.6%

Other

2.6%

Games

2.5%

Electronic

2.1%

Food

2.0%

Personal

1.7%

Source: Promotional Products Assoc. Int’l.

High-end gifting

Last year was a banner year for many branded, luxury merchandise manufacturers as corporations and others looked to give gifts that recipients associated with value.

For example, Coach’s revenue generated from corporate gifting business has “significantly” increased year over year in each of the last five years, with 2004 being a “banner year,” says Paul Spitzberg, VP-special markets for the New York City-based accessory maker.

Spitzberg, who is also the executive VP of the IMA, says he expects the trend to continue.

“Branded merchandise conveys the spirit of the gift,” he says. “It communicates that [the giver] thinks well enough of them to give them something branded and that they’re willing to spend that kind of money. The company who is giving the gift wants to be remembered for the gift and wants to be recognized. It’s their way of saying thank you.”

For the third year, Coach exhibited at the annual Promotional Products Association International (PPAI) Expo, held last February in Las Vegas. The company had a handsome, standalone booth that could be accessed from three sides. One luxury newcomer, Maui Jim, displayed its fashionable sunglasses, which have an average price point of $250. Exhibitors in the premium products category are projected to continue to grow as brands with high-price point products look for distributors to expand their base of corporate clients seeking premium products.

These branded gift manufacturers “have found that they can reach the buyer through our industry more effectively,” Carol Aastad, the outgoing chairman of the PPAI board, said at the show.

Another indication of P&I growth was the number of items on display at the New Products Pavilion at the show. More than 500 “break-through” products featured plenty of trendy flavor, including the ubiquitous silicon bracelets, USB smart sticks and imprinted roses, in addition to lots of apparel, pens, first aid kits and lava lamps.

Spending on promotional products grew 4.6% to an estimated $16.3 billion in 2003, according to the latest figures available from PPAI. The largest category was wearables at 29.5% of expenditures followed by writing instruments (10.5%) and desk/office/business accessories (7.7%).

Holding court

Consumers’ and politicians’ concerns over gift card dormancy fees and expiration dates heated up last year with more than 25 states now having enacted or introduced legal protections for consumers. Expect the efforts to continue this year as more states join in and continue pressing for legislation.

Simon Property Group, Inc. came under particular scrutiny for charges attached to its Simon Visa Giftcard.

Last month, Simon settled with New York state Attorney General Eliot Spitzer, agreeing to pay $125,000 in penalties and to make some changes to its fee structure and disclosure practices. The settlement came just weeks after the state filed a lawsuit charging that Simon had violated a recently enacted law governing gift cards.

In November, three New England states — Massachusetts, Connecticut and New Hampshire — sued Simon over dormancy fees and expiration dates on its gift cards. In December, Georgia Gov. Roy Barnes filed a similar suit representing two Georgia shoppers claiming fees and expirations dates on the card were illegal. That lawsuit seeks class-action status.

And to the chagrin of some gift card marketers, an emerging business in the swapping and selling of gift cards appears to have taken hold.

Sites like auctioneer eBay, Inc. joined startups, designed specifically for buying and selling gift cards, like SwapAGift.com and CardAvenue.com. At the sites, gift card recipients can exchange their cards for others or buy new ones. A search under “gift cards” on eBay just after the holiday season delivered 3,279 hits. The hits included cards from Blockbuster, Victoria’s Secret, Office Depot, Tiffany, Applebee’s Restaurant and Lowe’s.

SNAPSHOT 2004

Spending on incentive products and services may hit $28 billion in 2005

Independent research lends credibility to the incentive industry

The right incentive programs can boost performance among teams of employees by as much as 44%, and among individual workers by as much as 25%